The Southern District of New York rejected the Google Books settlement. I provide a summary of the opinion here. Essentially, Google negotiated a settlement with the publishers and authors that sued it. Then, after the settlement, hundreds of publishers and authors objected. Competitors and the DOJ raised concerns. So, yesterday, the court rejected the settlement based mainly on those objections and concerns. It applied a nine factor test, relying mainly on one factor–the reaction of the class. It determined that the class had five important objections. (All of which I summarize here.)

Here I want to post some initial reactions about three themes that seem to animate the decision.

These themes are: (1) that Google shouldn’t benefit from its blatant copyright infringement, (2) that Congress, not a court, should determine many of the forward looking issues, and (3) that the settlement should be rejected because it would grant Google a monopoly over out-of-print books still in copyright (e.g., many books published after 1923).

Copyright. At several points, the court suggests that Google engaged in massive copyright infringement. Usually, it merely quotes one of the objectors without endorsement. These quotes include calling Google a “serial infringer” or “pirate.” The court also states that the settlement would give Google advantages over competitors, therefore “rewarding [Google] for engaging in wholesale copying of copyrighted works without permission.”

This implicit theme of Google being a pirate strikes me as misguided. First, Google has a fair use argument for its copying; so far, Google’s uses have been limited and noncommercial. Google did not merely flout the law but appears to have attempted to follow it.

More importantly, Google’s actions are the usual means of progress in distribution technologies. A page of history is worth a volume of logic here: the history of copyright suggests that incumbent distributors will try to disadvantage new distributors by withholding copyrights. Technological advances often came from innovators “copying first” and asking for permission later. Tim Wu has analyzed this history, and I discussed it recently in the context of online television. For example, in the early 1900s, makers of piano rolls disregarded music composers’ copyrights. In the 1960s and 1970s, cable operators rebroadcast broadcast signals without obtaining copyrights. Copyright holders sued VCR makers for copyright infringement. Copyright holders characterized the Internet as one giant copying machine. If piano roll companies, cable operators, VCR makers, and Internet providers had waited for permission from their competitors–the existing distributors of copyrighted works–they would have waited a long time. This wait would have denied or delayed innovative benefits to all of us. Digitizing libraries has enormous benefits, as even yesterday’s court opinion acknowledges. (“Books will become more accessible. Libraries, schools, researchers, and disadvantaged populations will gain access to far more books.”) But I think Google deserves credit for moving forward on an innovative way to distribute information; history suggests that waiting for permission is often a losing proposition for everyone

Sometimes, the courts side with the new distributors, sometimes they do not. The usual resolution of such disputes is either immunity from infringement or a compulsory license. A compulsory license means granting distributors the right to distribute copyrighted materials for a set fee. This resolution usually happens through Congress.

Congress. Second, while Congress does often resolve these new copyright issues, the court’s beliefs about congressional action seems idealistic. The court says: “The questions of who should be entrusted with guardianship over orphan books [i.e. out of print, copyrighted books], under what terms, and with what safeguards are matters more appropriately decided by Congress than through an agreement among private, self-interested parties.” While Congress is more suited for a forward-looking, ex ante remedy than a court would be, it is not because Congress will look beyond self-interest. As Jessica Litman recounted in a classic book about copyright history, Congress makes copyright policy by blessing negotiations among private, self-interested parties. Indeed, for about 100 years, Congress has not engaged in rational policy analysis of copyright policy; it has simply deferred to private negotiations, as no other method has succeeded in passing a copyright revision. The congressional process suffers from classic public choice problems, heavily favors commercial interests over noncommercial interests, and concentrated interests over more public interests. It usually results in broad copyright protections and specific, narrow exemptions for those lucky enough, and powerful enough, to be at the table. In this case, before Congress, Google would have every incentive to agree to sweeping copyright assertions by authors and publishers, in exchange for exemptions to those assertions. The primary difference is that Google’s largest competitors–such as Microsoft and Amazon–would likely be at the table in Congress, and could sink any negotiated bill that gives Google exclusive advantages. (Just as they were able to sink this settlement in court.) So, while Congress may be the right place, it would be the right place largely because it would likely ensure that a larger number of private, self-interested parties are invited to the negotiation. Congress is not the right place because it will engage in enlightened policy making on copyright or more carefully consider the public interest. Again, copyright history tells a pretty persuasive story on Congress’s usual role.

Information Monopolies. The court is right to be concerned with the settlement’s effect on competition. While Google took the initiative to digitize millions of books and should be able to monetize that investment, Google should not receive exclusive legal advantages. The settlement grants to Google, and Google alone, the right to publish out-of-print copyrighted works without permission, until an objection. Other competitors would have to obtain permission first, before publishing online in the first place. Microsoft, Amazon, and the Department of Justice contended this would grant Google an effective monopoly over these orphan works. As a result, Google would have an advantage in the search market–people would begin their searches at Google’s more complete catalog–and in the subscription market–libraries would subscribe to the most complete database of books, which is Google’s.

The court was concerned with the problem of Google becoming, essentially, an information monopoly. The court’s discussion reminded me of the AT&T breakup order in 1982, where the DC district court imposed additional conditions on AT&T–above and beyond what the DOJ sought in a consent decree–based on First Amendment concerns. As the DOJ’s mandate pertains to competition concerns, the AT&T court looked more broadly to public interest concerns implicit in the First Amendment–notably that the First Amendment favors the “widest dissemination of information from diverse and antagonistic sources.” The court also looked to the recent history of media consolidation, and noted a fear that the consent decree, unless amended, could have led to further media consolidation. As a result, the court imposed a condition on AT&T’s ability to compete in a nascent industry called “electronic publishing.” Electronic publishing was not Google Books; but the court was not really sure what electronic publishing was beyond the transmission of information through phone wires.

Once again, yesterday, a court seems reluctant to bless a negotiation that would lead potentially to the concentration of control of information in the hands of one company. This reluctance reminds me of Jack Balkin’s observation that the most important free speech questions in the 21st Century may be questions of “design”–of structuring our communications environments. (I write about these issues in a recent draft article, so they are on my mind.) The Google Books settlement will likely have a greater impact on how Americans access information than even recent, justly celebrated decisions about funeral protests or hate speech. As a result, the court seems keenly, and rightly, aware of the problem of information monopolies.

On Improving the Settlement

The court states that one change would address most of its concerns: making the settlement opt-in, rather than opt-out. At the moment, class members must opt-out of letting Google use their copyrights. Rather, the settlement could require publishers affirmatively to opt-in; just as Microsoft and Amazon must seek permission from every publisher or author, so must Google seek opt-in from every publisher or author.

My instinct on this different. I would prefer balancing the playing field for Microsoft and Amazon, but doing so in the other direction: they should be able to “opt in” to the Google settlement on Google’s terms. That is, Google has effectively negotiated a compulsory license for orphan works: it can publish works and then pay 63% of revenues. This will enable Google to digitize books more rapidly, without fear of major liability, and with revenues going to copyright holders. These are important benefits. The settlement as structured undermines competition: Google has special status as the lone publisher with this compulsory license. Rather than removing the license from Google, the court should encourage extending it to all providers. Even competitors should have this compulsory license. This would provide the public the benefits of rapid access to these works in digital, searchable form, while also providing competition in providing that access. Changing the opt-out to an opt-in is more like throwing out the baby with the bath water.